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Not Enough Consoles, Not Enough Games

THERE is bad news on the horizon for the video game industry: Ibe Ozobia Jr. is considering selling his Xbox 360 console.

Mr. Ozobia, 32, of Las Vegas, an avid gamer who spends 25 hours a week roaming and shooting in virtual worlds, was ecstatic last November when he picked up his new 360. But something has gone wrong: too few good games have been produced for the console, he said, and he is bored. "My system is just sitting there, waiting for a game," he said.

Video game players may become yet more frustrated -- and the software industry may yet feel more pain, too.

Supply shortages have bedeviled Microsoft since it released its latest Xbox last November, and Sony announced last week that it could not rule out a delay of its own next-generation console, the PlayStation 3. Instead of having a spring debut, the machines may not hit American retailers until next holiday season.

The absence of consoles has put software makers like Electronic Arts and Activision in a bind. They are not selling as many next-generation games as planned, but are getting little relief from sales of games for the legacy systems like the original Xbox and PlayStation 2 because consumers are saving their money for the new stuff.

Joe Osha, an analyst at Merrill Lynch, wrote in a report that Sony, because of manufacturing challenges and the complexity of its high-definition Blu-ray technology, might not have the PlayStation 3 ready until 2007. If the console is delayed, Mr. Osha said, it would jeopardize the $2.9 billion in PlayStation 3 software sales he had projected for next year.

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The dynamics of the console transition are forcing software makers to adapt. Last week, Electronic Arts said it planned to start selling its much-anticipated new mobster game, The Godfather, next month for $39.95; that would reflect a 20 percent discount from earlier prices.

For its part, Microsoft says that by June, it plans to have shipped 4.5 million to 5.5 million consoles with 80 available games (up from 19 now). A spokesman said that the shortages were "short-term in nature" and that the company should be caught up with demand by early April.

In 2005, sales of video game software fell 4.7 percent from the previous year, said Evan Wilson, a video game industry analyst at Pacific Crest Securities. He projected that sales could rise slightly in 2006, but only because the industry was coming off such a disappointing year. Over time, he expects the industry to prosper because the increasingly sophisticated consoles are capable of playing richer games and doubling as home-entertainment centers.

But he says he worries that investors are not taking seriously the threat that delays could cut into the growth of 15 to 20 percent that they project will materialize in 2007.

"It's a long time to wait," he said. "A delayed PlayStation 3 or low amounts of units could have the same impact on 2007 that the poor 360 showing had on 2006."